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Households at risk of flooding face missing out on £700 million of new funding for defences, after ministers said they wanted to spend the cash on “more imaginative” projects such as planting trees and protecting big businesses and mobile phone networks.

Rory Stewart, the floods minister, told MPs the new cash, announced in the Budget, may not be spent in accordance with the usual “clear, rational, economic, transparent” formula, which puts “most of its weight on protection of houses”.

The current system, which would be used to allocate most of the existing £2.3bn six-year budget for flood defences, tended to benefit areas such as the Humber where there are “an enormous number of houses which are at risk of flooding”, he said.

“The additional £700m is likely to be the money we could use potentially in a more imaginative way to look at things which aren’t captured by the formula,” he told MPs on the Environmental Audit Committee (EAC).

He said the extra cash, which is to be funded by higher taxes on insurance policies, had been made available as a “political calculation” and could be spent on things where the benefits were more difficult to measure, such as “natural flood alleviation, so planting of trees”.

It could also include things that were “matters of political judgment” such as protecting “critical infrastructure” like electricity substations, or prioritising households in “particularly vulnerable and deprived communities”.

Mr Stewart suggested that the new approach would enable more money to go to protecting the city centre of Leeds, where a £190m flood defence project was cancelled on cost grounds in 2011.

Floods in Carlisle in DecemberCredit:
OLI SCARFFOLI /AFP

"Leeds famously didn’t stack up if you ran it through the traditional formula that simply looked at narrow cost-benefit,” he said.

A political judgment could take into account the fact Leeds was also home to “the headquarters of major industries” and had “fantastic growth potential” for the finance and insurance industry, he said.

Appearing alongside Mr Stewart, Oliver Letwin, the Cabinet Office minister, said Government was also looking at ways of protecting mobile phone signals after Vodafone’s data centre in Leeds was affected by the floods.

The ministers faced criticism after a previously-secret report commissioned by the Government was published showing they had been advised not to let investment on flood defences drop below 2014-15 levels. Funding dropped by more than £100m for the following year.

Guy Shrubsole, campaigner at Friends of the Earth, said he was worried that the Government might "prioritise protecting infrastructure over protecting homes".

He added: "The Government has repeatedly ignored warnings that it needs to invest more in flood defences to keep pace with climate change."

A spokesman for the Department of Environment, Food and Rural Affairs said: “We have committed an unprecedented £2.3 billion of capital investment to help our most at-risk communities over six years. We also committed a further £700m in funding for flood defences and maintenance in the recent Budget.

“We are investing this funding into protecting both houses and businesses from the sort of devastating flooding we saw in December. To ensure we spend this money in a way that best protects both residential areas and local economies, we are looking at how money is allocated to ensure the balance is right.”

Alex Cunningham MP, Labour's shadow floods minister, said: "Labour have been calling for a greater focus on flood prevention as part of a long-term strategy that addresses all aspects of flood risk management. But ministers need to urgently clarify what ‘more imaginative’ means for the country’s flood defences.

"As the recent revelations about the regional disparities in flood defence capital spending show, the Government must be transparent about the basis for making decisions about flood defence expenditure.

"Flood-hit communities must be reassured that these plans are based on sound science and evidence.”